OIS - Earnings call transcript Q1 2019 | Oil States International, Inc.

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Operator

Hello and welcome to the Oil States International First Quarter 2019 Earnings Conference Call. My name is Raina, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn of Gil, now Relations. Investor will call Patricia over Director I

begin. may You

Patricia Gil

Raina. you, States' conference XXXX Oil morning first earnings Thank call. good quarter And and welcome to

will and Lloyd Oil Oil today Our Financial Cindy and Vice Hajdik, led Officer. Chief Officer and States' Taylor, call Executive States' be President President Chief Executive by

This are Oil Before the statements. being information over accessed that we will available extent call today can for be the disclosed will website. conference contain on To the other factors States' note our many we call and historical completion relying is our law. like of Cindy. please that call remarks now the should turn caution to Harbor business, along including risks those our by filings. would begin, Form webcast at be in replay Safe the we hours the listeners after to weighed forward-looking be XX-K information, one call than protections will and of A X.X in regarding the federal month. the I of available affects such SEC remarks with context be that afforded other Any

Cindy Taylor

thank Good all Patricia. XXXX quarter morning participate Thank you, in first joining of you you to us and for our to call. today earnings conference

uncertainty. prices, the first entered we quarter fourth commodity heightened volatile regarding a a level XXXX Following of in quarter with

of relatively spending our quarter if the activity. as given price level and progressed, first improved customer stable, However, commodity increases not improving outlook a

margins our the high-end held previous our quarter and All at of or of completed our up well. the business guidance segments near

add details by improving of will improved outlook. particularly year. a and details service X.XX with comments also book-to-bill and evidencing Services and more quarter as our financial for offshore for provide which additional by of products ratio global you times balance Downhole Our consolidated our bookings of encouraged manufactured offshore progressed. market will follow demand quarter, highlights million additional product take visibility $XXX and through We Well better the creates segments will the and of to results guidance the Technologies segment experienced were the our Site Lloyd which demand I position. our on provide

Lloyd Hajdik

Thanks, morning, Cindy, and good everyone.

first generated the million, we while a $X.XX $XXX share. $XX During loss reporting million quarter, of of revenues per net or

Million EBITDA quarter impacting the margin $XX first effective recognized percentage was with lower EBITDA an We certain the first charges. of totaled statutory EBITA The in rate rate Reported tax due Our effective $! tax the benefit of non-deductible X.X% an of million negatively quarter. impacted to was items X%. severance by benefit rate rate. than

flow $XX quarter, define free During facility the we and million. capital million revolving operations in our standing utilized expenditures, our capital and under cash as expenditures. spent in million in from million we which cash by $XX We pay our generated credit down $XX borrowings generated flow from $XX to flow cash flow first cash less free operations,

ratios secured allowable leverage times leverage XX, was first hand totaling our times, net of X.X times on times, and the million. ratio net below cash approximately ratio March end At ratio XX% our of capitalization quarter position inclusive at senior XX, available of liquidity As of million, the debt-to-book was March X.XX X.X was $XXX the $XX debt our was respectively. maximum our well and and X.XX

with year million. interest for and we Total expect consistent range XXXX still of $XX million full net capital $XX million. the guidance, our total terms expense to XXXX expect guidance. we $X.X and between $XX In second projected expected consolidated million expenditures and Further to expenses total to spend amortization corporate million depreciation are to are total quarter $XX previous

provision the tax our primarily expect income of quarter, will provision. effective of tax to For items results And call level I'd our dependent Longer-term, compared turn who time, through business of back estimated upon rate be non-deductible this returned U.S. over to the pre-tax tax profitability. tax in as to level like the the for to trend U.S. the towards we each operations at take our rate corporate realized Cindy second segments. our to details of will our you the XX%,

Cindy Taylor

range averaged we revenue, Well compared their in cost our we EBITDA revenue of the material rigs decline, in business, concentrated XXXX, prices sequential million the severance a of million we both oil drilling and land was disproportionately our severance XX% was with negatively the With along averaged of lower service of of drilling Services In Permian rigs, the reported Completion of revenue fourth in our Mid down as experienced Services shut temporarily quarter quarter the customers utilization quarter our XX% following declines impacted the and crude EBITDA with in XXXX. were Starting the These XXXX. which quarter Continent $XXX the to the quarter in segment, of operations XXXXX. quarter incurred, segment streamline by compared Utilization first by of the to the our efficiencies Basin. X% guided XX% which fourth generated the upper-end improve our Completion of $XXX,XXX and of Drilling at results negatively Services land Site XX% only region continue our in of in was first EBITDA our cost businesses, drilling first programs, of XXXX, offerings. impacted to fourth margin to of the in as decline in $XX XXXX.

of $X XX% costs impacted declined absorption wrapped up with quarter higher levels ahead impacted for cost margin EBITDA and defense facility were $XX completions, led first fourth reported Downhole interventions results of by quarter non-recurrence increased the our which EBITDA guidance. segment, they demand generated the were we Further, of quarter. margin positively also manufacturing the products to an of While revenues litigation, midpoint during In which slightly comparison. Technologies for the our of Segment sequential in XXXX of in throughput. and the of positively patent the with of million perforating EBITDA margins sequentially, our improved million

screwing on for in systems continues integrated gun with technology GEODynamic completely system, update operation. required on components wanted progress market. location our gun integrated to Operators Physics. running with available and believe provide an be system is before the tools. site on early systems. intrinsically and technology, press safe with plug-and-perf combined removing our request our we by complement by Field that Franklin is wellsite is the systems our market, and is the of protectors perforating the addressable the efforts safety perforating efficient the associated downhole best-in-class downhole. and design GEODynamics to provided We switch, other to you certified patented to together system factory-loaded Given is and at required shipping guns and efficiency for the Applied that the assembled continue All commercialization makes fully proprietary and what thread entire and provided testing

expanded offering wells. facility further to a commitment have into our staff in engineering with builds and production better This through loading commissioned our operators help gun industry-leading on have We system development ramp perforating planned multi-year make our and XXXX. our GEODynamics product reinforces and

field customers, investment to support integrated group are Our directly of the to our us as tailored an to group maintained. personnel opportunity manufacturing to brought will is to product future technical both to the wellsite This providing operator wellsite. their quality the ensure is continues work our market, solutions product location solutions newer our generate group to trials deploy products sufficient in delivering offset technology, and wireline revenue our ultimately and and performance the for from support is in offerings costs. trialed group This to our affords and product

to X% by This gun In business product our and content Engineered higher XX% We major retained a we sales sales decrease South revenues during a quarter. sequential margin We in revenue America. market projects-driven product offshore our service recover of segment by sales. during million, driven destined project segment, for in million partially for product first quarter Perforating first segment commercialized. our and generated production EBITDA offset system revenues lower expect the manufactured the military award was of $XX a facility integrated is and EBITDA share proprietary of once $XX Solutions fully

visibility XXXX quarter. to now continue offshore customers and is constructive awards our increase Our the first in backlog This times. orders and sequential totaled share be $X.XX I our book-to-bill June of regarding the booked market attained would developing backlog our in outlook XXXX. additional a quarter ratio highest on XX% to level our for thoughts of measurably. like $XXX reported resulting Conversations with in since our project sanctions a to project second for million is deepwater

drilling consolidated are activity Offshore/Manufactured to by levels Our higher and Products second related our as results sequentially from well in U.S., quarter as the improve completion segment. greater expected driven contributions of

plays utilization XX% for outlook which we following to shutdown segment are to segment Services within lead spending our this U.S. for levels XXXX activity to Our Wellsite a $XXX $XXX for the between is shale higher expected levels from land of which business price $XX.XX along environment second supported million for our environment, should crude improved in estimating price range of first supported operate. improved with and predicated recovered customers in between on revenues begun and These as the quarter, drilling project-driven by quarter end barrel. activity Products already their segment that U.S. expected million prices regions our per our is commodity customers reflect international revenues have in sequentially this we completion resume Offshore/Manufactured year increasing XX%. With temporary price programs, and to commodity to EBITDA have WTI the segment. estimates margins our drilling given a XX% Further, average activity with

buoyed quarter. quarter For mix. sequentially by segment level, revenues. quarter that margins million our with our range XX% begin in $XXX on of forecasting $XX to conclude, currently will a Technologies segment, second and margins million XX% expected we To to starting revenues XX% EBITDA the depending and Products Offshore/Manufactured into between businesses. for revenues range and our will and second estimate also averaging will up ranges are backlog $XX EBITDA we which to is the that average In at product million guidance our segment and all to our second increase of for are between our million Downhole service segment, Segment midpoint EBITDA convert $XX revenue sequentially the higher XX%

stage the the award, project in discussed, and improvement in segments As remain Downhole while to technology wells our all evidenced we opportunity We on positively deepwater customer customers This make setting open up flow award prepared Offshore/Manufactured major time progressed sanctions by generating up Products positive Wellsite projects believe segment. capital. generating trending That we across for a FIDs segment. completes quarter. the as the sequential helping deepwater our our focused cash in our booked at is coupled XXXX, Technologies the better with Services and call positive benefit on controlling project significant and the first a as comments. will you cost continue free please? we for favorable trended answers carefully our for additional power first this through our would questions returns advancements U.S. of developing outlook Raina, spending quarter, invested for set

Patricia Gil

for Raina, call open the up Q&A? would you

Operator

comes of James. question first Our Instructions] Praveen Narra Raymond [Operator from

begin. may You

Praveen Narra

Hey, morning everyone. good

Cindy Taylor

Hi, Praveen.

Praveen Narra

higher. of of started your we oil progressed, in like half obviously terms Hi. of post second and get of and the kind you just indications of rest change talk Can was you what of the getting? I on about –moving you the how how quarter, budgets it customers the in kind about thinking March year than are will macro the prices terms better in going XQ guess, sounded environment are but

Cindy Taylor

fairly when reduction their itself I budgets January. Well, you we whatever end That prices by But rate whether progressed of I in activity. the was degree change saw seeing to significant quickly. price, saw Technologies Services in of say seeing at had customer time QX, know plans April that XXth, more U.S. through They exit relief really whatever get we one I that going quickly different the are It we slowdown can prices kind cetera, a modest by And that the was crude we than we in realize with quarter, collapsed fairly our Wellsite we about the land for et technical can and a generally really when is a driven so that’s and as were doing of every when driven quarter, people And a a quick most realized happened work say can month be it’s really customers QX. operations evident scenario and QX thought. of land not XX wells rate quickly to of suggested, is, the in below activity. the with were completion that not fall when of if and around, for higher services, very March for your with to tend that’s course, shale are associated little we our drill and into throughout discretionary quarter are we in a with January land go you drilling we said, that’s in arms planning. indication we us play we prices what reassessing more this I improvement increased time course, primarily Downhole continuation reverse but roughly see here, by obviously in by now to plans set that and anyway. as And continual also solidifying being we the see really these again, the improvement their would exiting talk

back and course would of tell drilling rigs Services, it quite lot conversations – mean, I the you shale relates about a And seeing a we work. the part that’s, that’s tough but experienced guidance. are the of is already had just that to land those tell best in So only had visibility you what I we we’ve I as can it’s also Wellsite to go shorter.

So that’s disproportionately on for Services again embedded the drilling. down guidance Wellsite

to disproportionate On the be utilization will quarter levels. significant drilling back way up, fourth that again pretty in QX back towards which already appeal weighted it significant is decline fairly recovery

the confidence relates buoyed these quoting we awards is Products, absolute I’ll book-to-bill out are the and has us terms in really to a really both in for really time are FIDs there ratio it for as X.XX of quarter couple of bookings market, projects book-to-bill that dollars major receiving – that As our are awards and activity both what been as and bolsters our which Visibility works fuels frankly it us those last longer lead Having for project backlogs call are ratio know. our soft significant but times last provided as of Manufacturing/Offshore us. project well years. timing of quite you

not our more couple of for about balance outlook XXXX been So, to for me it where little relative ‘s we've the the hard feel to a enthusiastic over last of years.

Praveen Narra

production quickly. helpful. talk could sure I gun we to guess, about of if Right. so make expect That’s be guess, of super I the could you as done switch guess, QX. sounds you into to like terms that to integrated commercialization, in up And the it in just XXXX? I ramp that pace reaches full also,

Cindy Taylor

space. and integrated already in terms of system. their already this We the clear that, components we are all, leader I GEOdynamics acquisition solutions into on in engineered perforating that gun Well, are the be want to through long first a we of history lead

think as as So, delivery of product much this it is. necessarily system. enhanced I Much branding revolutionary as don’t

I other So have the charge what business. we in words, in we think best the are – – shaped

the that’s switch integrated. is to We packaging both this and I package. known integrated less, part at So guns would guns, point of be going long and is to of that What manufacture is be say that the short the gun. going

about we good where feel I so, And are.

trials field We are and in did field trials. we

of them absolute are successes. Some XXX%

of through this early the of them little commercialization and working it’s do expect third and a whether that soon are in of Some current so, again. we quarter, quarter, tweaking require late bit fairly quarter kind

think actually on quarter integrated without I results, we improved you As that which products on have But solutions system. we improvement the some We of reliability, our do the showed having ease and perforating as for see you believe running, our that packaging gun. gun firmly looking in into are just efficiencies customers first said, already integrated are means track. we operating

Praveen Narra

Thank on Perfect. the congrats good very and much quarter. you

Cindy Taylor

Praveen. Thanks,

Operator

Our of Simmons. from Please ahead. Macpherson next comes question go Ian

Ian Macpherson

morning. in order I believe this Thanks. Good Cindy. morning, congratulations are

Cindy Taylor

you. Any day, you. thanks Thank to

Ian Macpherson

Yes.

correct I package to in I that? in base in a wrong if it, – infer, me your, the addition The orders would to majority large in pertain production am booking was load or the that sure. first the facility your step-up also there step-up quarter of the call orders For

Cindy Taylor

have I So, – it’s agreement. just general

if one is though have you infrastructure a tremendous Of course, of of it. awards book-to-bill couple a without look amount, a a products was base X.X weighted most it our are fronts, but proprietary above last us project North on kind been you this significant without production or welcome years, having business a did and elevate for good. at will, infrastructure, but even floating couple back slightly two major order by would years our production the book-to-bill for for I it many so will of because one of But tell that yielded our products book-to-bill that core size, its and one ratio that we’ve you one-to-one last the ratio times. really not north now of if of any towards

Ian Macpherson

conversion, to the relative gestation forward got just one going to, how think to like you encouraged backlog helpful. forward more what That's the this recent for sounds it talk should Okay. are other awards the year we how like in your looks guess, And that are very there I then, for significant are and the and period comfortable target and you Thanks. other and going you X.X with later? for the standard? that Can X.X place you about

Cindy Taylor

year. in busier well, our are think we number with facilities I much manufacturing one, shape, past in a Yes, great in

very orders type for delivery that And to getting. we to attentive and and to we so performance quality, are work the get are timely be eager will they on-budget

say, we good will are obviously about I of news. subsea engineering lot materials production and procurement. our infrastructure, require – these So, a it’s talk obviously When front-end

to year, it We The build, our start connector this but that won’t good do a of the revenue to driven front-end other of Ian? products revenues question, of your in revenue shorter of really if is be that sequential EBITDA large connectors most of to We answers but engineering and little revenues order, recognize a and a point as standard particularly the news this will in to revenue we guided recognition. fact. lend duration improvement this terms opposed at lot then lot percentage standard areas bit backlog that by recognition of is from immediate because recognition completion is,

Ian Macpherson

Absolutely. But of POC generally years? convert the the bigger speaking, projects typically will within couple

Cindy Taylor

and I months normally, less. would for But to or it cost say, again one. XX studied I immediately thing Yes, that absorption. the is good I at though, this or would cost order road, months The one absorption say this course, facility manufacturing particular point. down lending starts haven’t XX of normally, engineering itself fairly less

Ian Macpherson

Cindy. Very good. Thanks,

Cindy Taylor

Thank you, Ian.

Operator

Thank you.

next Please caller Stephen is ahead. Our Gengaro go Stifel. from

Stephen Gengaro

as of see unfolds are statement, what seen backlog have what you but the the see over Thanks. morning there know right with looking now versus right To how Offshore/Manufactured hopefully the now Products is seeing you Cindy, on start sort I on everybody. the order far Good an kind bidding this side, is questions. year? and you are we flow positive last overhead absorption pricing you the I two as income that as guess, of on

Cindy Taylor

sense the price more is we these weighted I not that that components, of say, you pressure individual towards we are kind proprietary in the are have necessarily project-oriented more products, pricing that the Pricing, are economics, our of competition. this the because would getting, one less issues

providing that to needs the customers terms can. have We cost-effective be the of in tried our we responsive most equipment of to

streamlined some years. four over that cost the our in of reductions We’ve to headcount three course seen reduced also have last the process. We degree manufacturing and through or

in of So, you margins history. again, expect events, product, our combination similar of for this I generally just type to have with say that what witnessed we

Stephen Gengaro

ticket from then, it it us Services count growth? Thank should average – U.S. And But and quite relative you which service job completion of question revenue revenue kind second my how the your either you. and piece you look anyway. to Wellsite, line-ish? - Will And when Lloyd always at removed honestly that land? for being of of or then, could of think confused that me the per of stage might growth Okay. growth be you is said, rig what disclosure Completion tickets sort Will in it better? be a sort we portion be business frac little about remind that and

Cindy Taylor

generate with everything We did out to then, were going said. you cash why is am might probably explain our else exactly what everybody and create where say what for example, free the we is is and across disclosure it's And as as held we start billings and extent just open as you that is month and and confused to why are do operations take within just changing have we trying I the ticket to that that weeks flow that, are. you efficiencies own and an occur.

tickets, but And of revenues. have a so, number number Falcon. greater of you acquired yes, We really a have greater do you

of day, also hold not today on mix than necessarily then done customers next, might was are have prior to pre They the our they They our in different frankly And equipment hour periods. have which is kind acquisition. to every one well efficiency. the out changed. focused So are of Falcon every quite going truly it count ticket of from

information really is. count with to more we for drilling which as And rig said do activity, and as well used to it count. analysts us in really so, the rig is aren't or recognize completion then what probably count, available it used accurate correlated change And the correlate really you is readily or we is meaningful itself whereas this lending to not for that to to

felt to like it We might be useful confusing. So, we information. this you. only takeaway never not not was again, even think useful, it’s We

question one. was that So question two, Then Abruptly] [Call Ends

Oil States International (OIS) 29 Apr 192019 Q1 Earnings call transcript